Dunne: feedback sought on taxing employee allowances

“Essentially, the proposed changes are to make the rules easier to apply,” Mr Dunne said.

The paper, Reviewing the tax treatment of employee allowances and other expenditure payments, suggests a number of changes to the tax treatment of certain payments to cover expenses such as meals, accommodation, clothing and cellphones.

“The current legislation around allowances and other expenditure payments can leave businesses unclear about the extent to which such payments are taxable under different circumstances,” he said.

“Under the current rules, payments that meet an employee’s private expenses are treated as being part of the person’s taxable income. However there are occasions when the line between a private expense and what is solely a work expense is not straightforward.

“The issues paper makes some very practical suggestions about how to resolve these uncertainties and make the rules simpler for employers to administer,” Mr Dunne said.

“It recognises that any changes must take into account the costs to businesses in administering the rules.

“For that reason, the paper suggests some clear boundaries for particular allowances, including the time over which they are provided tax-free, to give greater certainty to businesses.”

He said that the paper seeks feedback on the suggested changes.

The paper, Reviewing the tax treatment of employee allowances and other expenditure payments, is available on Inland Revenue’s tax policy website, www.taxpolicy.ird.govt.nz